5.	Income Taxes

As of March 31, 2018, the statutory income tax rates of the countries where the Company conducts business are 21% in the United States, 0% in Bermuda, 0% in the Cayman Islands, 26.01% for companies with a registered office in Luxembourg City, 0.25% to 2.5% in Barbados, and 25% on non-trading income, 33% on capital gains and 12.5% on trading income in the Republic of Ireland. The statutory income tax rate of each country is applied against the expected annual taxable income of the Company in each country to estimate the annual income tax expense. Generally, during interim periods, the Company will divide total estimated annual income tax expense by total estimated annual pre-tax income to determine the expected annual income tax rate used to compute the income tax provision. The expected annual income tax rate is then applied against interim pre-tax income, excluding net realized gains and losses and limited partnership distributions, and that amount is then added to the actual income taxes on net realized gains and losses, discrete items and limited partnership distributions. However, when there is significant volatility in the expected effective tax rate, the Company records its actual income tax provision in lieu of the estimated effective income tax rate.

The Company’s income before income taxes from its non-U.S. subsidiaries and U.S. subsidiaries for the quarters ended March 31, 2018 and 2017 were as follows:


Quarter Ended March 31, 2018: (Dollars in thousands)	Non-U.S. Subsidiaries			U.S. Subsidiaries			Eliminations			Total
Revenues:
Gross premiums written	$	10,315		$	113,932		$	—		$	124,247

Net premiums written	$	10,314		$	97,556		$	—		$	107,870

Net premiums earned		48,022			59,980			—			108,002
Net investment income		15,221			7,188			(11,005	)		11,404
Net realized investment losses		(5	)		(311	)		—			(316	)
Other income		51			503			—			554

Total revenues		63,289			67,360			(11,005	)		119,644
Losses and Expenses:
Net losses and loss adjustment expenses		20,565			35,507			—			56,072
Acquisition costs and other underwriting expenses		21,140			23,863			—			45,003
Corporate and other operating expenses		4,399			4,861			—			9,260
Interest expense		4,841			11,025			(11,005	)		4,861

Income (loss) before income taxes	$	12,344		$	(7,896	)	$	—		$	4,448


Quarter Ended March 31, 2017: (Dollars in thousands)	Non-U.S. Subsidiaries		U.S. Subsidiaries			Eliminations			Total
Revenues:
Gross premiums written	$	54,102	$	107,936		$	(38,287	)	$	123,751

Net premiums written	$	54,087	$	57,419		$	—		$	111,506

Net premiums earned	$	50,933	$	62,193		$	—		$	113,126
Net investment income		12,328		4,959			(8,643	)		8,644
Net realized investment gains		41		734			—			775
Other income		87		1,281			—			1,368

Total revenues		63,389		69,167			(8,643	)		123,913
Losses and Expenses:
Net losses and loss adjustment expenses		20,860		41,701			—			62,561
Acquisition costs and other underwriting expenses		22,688		23,863			—			46,551
Corporate and other operating expenses		1,207		1,847			—			3,054
Interest expense		2,324		8,786			(8,643	)		2,467

Income (loss) before income taxes	$	16,310	$	(7,030	)	$	—		$	9,280

For the quarter ended March 31, 2017, the Company’s income before income taxes from its non-U.S. subsidiaries and U.S. subsidiaries, as reported in the table above, includes the results of the quota share agreement between Global Indemnity Reinsurance and the Insurance Operations. This quota share agreement was cancelled on a runoff basis effective January 1, 2018.

The following table summarizes the components of income tax benefit:


	Quarters Ended March 31,
(Dollars in thousands)	2018			2017
Current income tax expense:
Foreign	$	179		$	96
U.S. Federal		566			—

Total current income tax expense		745			96

Deferred income tax benefit:
U.S. Federal		(1,998	)		(3,098	)

Total income tax benefit	$	(1,253	)	$	(3,002	)

The weighted average expected tax provision has been calculated using income before income taxes in each jurisdiction multiplied by that jurisdiction’s applicable statutory tax rate.

The following table summarizes the differences between the tax provision for financial statement purposes and the expected tax provision at the weighted average tax rate:


	Quarters Ended March 31,
(Dollars in thousands)	2018						2017
	Amount			% of Pre- Tax Income			Amount			% of Pre- Tax Income
Expected tax provision at weighted average rate	$	(1,536	)		(34.5	%)	$	(2,364	)		(25.5	%)
Adjustments:
Tax exempt interest		(1	)		(0.0	)		(84	)		(0.9	)
Dividend exclusion		(65	)		(1.5	)		(193	)		(2.1	)
Base Erosion Anti-Abuse Tax		566			12.7			—			—
Other		(217	)		(4.9	)		(361	)		(3.8	)

Actual tax on continuing operations	$	(1,253	)		(28.2	%)	$	(3,002	)		(32.3	%)

The effective income tax benefit rate for the quarter ended March 31, 2018 was 28.2%, compared with an effective income tax benefit rate of 32.3%, for the quarter ended March 31, 2017. The decrease in the effective income tax benefit rate in the quarter ended March 31, 2018 compared to the quarter ended March 31, 2017 is due to the change in the U.S. statutory tax rate from 35% to 21% effective January 1, 2018 and the Base Erosion Anti-Abuse Tax (“BEAT”) that became effective upon the passage of the Tax Cuts and Jobs Act (“TCJA”). Taxes were computed using a discrete period computation because a reliable estimate of an effective tax rate could not be made.

Financial results for the quarter ended March 31, 2018 reflect provisional tax estimates related to the TCJA. These provisional estimates are based on the Company’s initial analysis and current interpretation of the legislation. Given the complexity of the legislation, anticipated guidance from the U.S. Treasury, and the potential for additional guidance from the Securities and Exchange Commission (“SEC”) or the Financial Accounting Standards Board (“FASB”), these estimates may be adjusted during 2018. During the quarter ended March 31, 2018, there were no adjustments to provisional tax estimates recorded in prior periods.

The Company had an alternative minimum tax (“AMT”) credit carryforward of $11.0 million as of December 31, 2017. The TCJA repealed the corporate AMT. The AMT credit carryforward of $11.0 million was reclassed to federal income taxes receivable at December 31, 2017 and will be fully refunded by the end of 2021. The Company has a net operating loss (“NOL”) carryforward of $14.7 million as of March 31, 2018, which begins to expire in 2036 based on when the original NOL was generated. The Company’s NOL carryforward as of December 31, 2017 was $16.3 million. The Company has a Section 163(j) (“163(j)”) carryforward of $7.9 million as of March 31, 2018 and December 31, 2017 which can be carried forward indefinitely. The 163(j) carryforward is for disqualified interest paid or accrued.